Over 80 percent of Pakistanis consistently report that their economic wellbeing has either deteriorated or remained the same. Only 20 percent, disproportionately concentrated in the very top of the distribution, feel that they are better off and similarly small numbers believe that economic conditions have improved for their locality. If we took a poll today, it is possible that many of you would say that extreme poverty has risen rather than fallen.
But in fact, the national data tells a completely different story! According to the national poverty line set in 2001, Pakistan has seen an exceptional decline in poverty—falling from nearly 35 percent in 2001 to less than 10 percent by 2013-14. Moreover, these gains were not concentrated among those close to the poverty line. Even the poorest 5 percent of the population saw an improvement in living standards.
The increase in incomes is also evident when looking at other indicators of wellbeing. Access to toilet facilities for instance, has significantly improved; Among the poorest 20 percent of households, those without any type of toilet has been cut in half—from close to 60% to about 30%, while the ownership of assets like motorcycles has risen from only 2% to 18%; and many more of the poorest households now have refrigerators, televisions and stoves.
Most importantly, households have changed their dietary patterns in ways that are consistent with poverty reduction. Even the least advantaged families in Pakistan have moved towards a more diverse diet, with a greater consumption of dairy, meat, fruits and vegetables. Not only has their diet become more diverse, households also spend a smaller fraction of their total income on food items, preferring instead to spend more on nonfood items such as housing, utilities, education, health care and consumer goods, including leisure goods.
So what accounts for the gap between people’s perceptions of rising poverty and the evidence presented above? Perhaps it is the relative lack of improvement in basic public services, or a perception that there is too much corruption, or that only the wealthy and connected can get good jobs or set up businesses. Perhaps there is a sense that the gap between the rich and poor is growing.
All of these issues are undoubtedly important, and rightfully influence people’s perceptions about their wellbeing. At the same time, they do not preclude a decline in extreme poverty.
Further, our collective sense that too many are poor may actually be linked to the pace to development itself. As societies develop, ideas about the absolute minimum acceptable standard of well-being also change. More precisely, with development, the minimum requirements for a productive life and personal dignity grow, and this changes a society’s views about who is poor.
Few would argue that Pakistan is the same country today that it was 15 years ago. As development has occurred our standards for what is a bare minimum level of existence have also risen – and this is a good thing.
To anchor this idea, ask yourself: what percentage of Pakistanis ought to be considered too poor (in today’s Pakistan), to afford the minimum standard of living necessary for a productive life and for personal safety and dignity? If your answer is anywhere between 25% and 35%, you are with the majority! Call the poverty rate obtained through such a question the socially subjective poverty rate for Pakistan.
A national poverty line, and poverty rate, is clearly most useful for guiding policy when it is well-aligned with overall development and therefore also with the socially subjective notion of who is poor. In this sense, the poverty line is always a policy choice.
All societies that aim to build democratic and inclusive policies must respond to development by periodically raising the standard of living for their most vulnerable members. In the (now) developed world, governments have intervened time and again to help ensure that the standard of living for the most deprived improves with development.
The government’s decision to set a new poverty line for Pakistan is extremely encouraging in this context. It was also necessary given the robust decline in poverty based on the old line.
The new line, which uses an improved methodology, sets a minimum consumption threshold of Rs. 3030 per person per month. This translates to between Rs. 18,000 and Rs. 21,000 per month for a household at the poverty line, allowing nearly 30% of the population or close to 60 million people to be targeted for pro-poor and inclusive development policies—thus setting a much higher bar for inclusive development.
Why Rs. 3030 per person per month? Well, while the analysis that produces a national poverty line is based on nationally representative household consumption data, and uses a rigorous and well established method, it does not uniquely determine a value for the line. Rather, it provides a range of options, all of which are compatible with the data, but only a few of which are also consistent with society’s understanding of who is most deprived at a point in time.
Pakistan’s new national poverty line is highly policy-relevant precisely because it resonates with the socially subjective view of who is poor today. Pakistan now needs to build on this bold decision by taking equally bold steps to scale up its efforts on other fronts. Things have not improved on key issues like child stunting or schooling or jobs, which will determine what the country’s future looks like. The true fruits of poverty reduction will only be fully evident when the quality of public service delivery and the quality of governance rise to meet the growing needs of the population, and key services are accessible to all Pakistanis.
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